Brigus updates Black Fox (January 31, 2011)

The changes continue over at the Black Fox mine in the Timmins gold district. 

The gold mine, which was formerly run by Apollo Gold, came under new management when Apollo merged with Linear Gold to form Brigus Gold (BRD-T, BRD-X) last June. And while Apollo had the mine up and running, under Brigus the mine has undergone a thorough review with the results issued in a new technical report.

The new report puts the net present value (NPV) of Black Fox, at US$359.4 million using a 5% discount rate and a gold price of US$1,200 per oz. for 88% of production and a price of US$500 per oz. for the remaining 12%.

The reason for the difference in gold prices is due to a gold stream agreement with Sandstorm Resource (SSL-V).

Sandstorm acquired 12% of the life-of-mine gold production from Black Fox for an upfront payment of US$56.3 million and ongoing payments equal to the lesser of US$500 and the then prevailing market price per ounce of gold.

That deal did, however, leave Brigus with the option to repurchase 50% of the gold purchase agreement by paying Sandstorm US$36.6 million.

The new report also estimates a mine life of 8.6 years based on reserves of 6.5 million tonnes of 4.4 grams gold per tonne for 906,375 oz. Ore will be processed at a rate of 730,000 tonnes per year with a recovery rate of 94% for average annual production of 104,000 oz. gold over the next five years.

Halifax-based Brigus says average cash operating costs will come in at US$502 per oz. with a break even gold price of US$602 per oz. It estimates that capital costs, including sustaining capital, will be US$74.8 million.

And while those numbers are robust, they don’t take into account the upside potential of extensions to the Black Fox orebody, which is still open at depth and along strike.

Brigus is bullish on the prospects for two additional zones, the Contact zone gold deposit and the Gibson zone, which sit roughly 3 km southeast of the mine.

The company is also in the midst of developing an underground mine at the open-pit site. It expects to have the underground infrastructure at Black Fox finished by March.